On Thursday the SPX started the morning with a quick dip down to 3212 which placed it below the 50 day moving average and the lowest level in the latest correction. That though brought in buyers who pushed back to send the SPX up to 3277 by 2:00 PM. That was the high of the day as sellers once again pushed back and send the index to 3230 before closing at 3246, well within reach of the 3250 light support level. The NASDAQ closed positive as well at 10,672.27. The action was more positive on Thursday and may have setup Friday for a second bounce attempt. Let’s take a look at Thursday’s closing technical signals to see what they can tell us to expect for Friday.
Stock Market Outlook Chart Comments At The Close on Thu Sep 24 2020
On Thursday the index slipped below the 100 day but then pushed back and closed above it. This left a bullish candlestick for Friday.
Meanwhile the Lower Bollinger Band fell further below the 100 day, which is continuing the bearish signal for the overall market at present.
The 21 day is falling to below the 3400 valuation on Thursday.
The 50 period moving average is starting to turn lower and needs to be watched next week for any further sell signal.
The index has now been trading below the 21 day moving average for 13 straight (trading) days without being able to climb back above it. This remains a strong bearish signal.
The 100 and 200 day moving averages are still climbing. There are still 6 up signals and now three down signals. The SPX chart is bearish but there are signs of a potential bounce back started by the move higher today when the index fell below the 100 day moving average.
Stock Market Outlook: Technical Indicators Review:
Momentum: Momentum is rising but still negative.
- Settings: For momentum I use a 10 period when studying market direction.
MACD Histogram: MACD (Moving Averages Convergence / Divergence) issued a down signal on Sep 4. On Thursday the down signal was stronger but very oversold. It is at readings where a bounce could be expected to develop.
- Settings: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9.
Ultimate Oscillator: The Ultimate Oscillator is moving sideways indicating a further move lower on Friday is not expected.
- Settings: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
Slow Stochastic: The Slow Stochastic has a down signal in place and is very oversold. It too is at readings where a bounce could be expected to develop.
Settings: For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic tries to predict the market direction further out than just one day.
Relative Strength Index: The RSI signal is rising and is also oversold.
- Settings: The relative strength index is set for a period of 5 which gives it 5 days of market movement to monitor. It is often the first indicator to show an overbought or oversold signal.
Rate of Change: The rate of change signal is trending sideways indicating not much change on Friday but more important no downside should be expected on Friday.
- Settings: Rate Of Change is set for a 21 period. This indicator looks back 21 days and compares price action from the past to the present. With the Rate Of Change, prices are rising when signals are positive. Conversely, prices are falling when signals are negative. As an advance rises the Rate Of Change signal should also rise higher, otherwise the rally is suspect. A decline should see the Rate Of Change fall into negative signals. The more negative the signals the stronger the decline.
Support and Resistance Levels To Be Aware Of:
3600 is resistance
3500 is resistance
3450 is resistance
3400 is resistance
3375 is resistance
3300 was support
3275 is support
3200 is support
3150 is support
3050 is support
3000 is support
2975 is light support
2950 is light support
2900 is light support
Stock Market Outlook for Tomorrow – Fri Sep 25 2020
For Friday the technical indicators are in general, oversold. Three are at readings that suggest a bounce attempt is imminent and should be expected.
The rate of change is signaling a low chance for a further move lower on Friday.
Investors should expect another attempt to be made to bounce stocks higher on Friday and end the day positive.
I had expected next week to see the S&P fall to the 200 day moving average before staging a rebound rally. We may not see that happen as volumes were good on Thursday once the market fell at the open, to a new correction low. Some sort of bottom to the sell-off may have been put in. Further dips should of course be expected. However the chance of the market to continue to fall will probably need a new catalyst to the downside. One such catalyst would be closing the economy for a second time, which I think is unlikely. Markets at present in this correction, look more like they are trying to put in place a bottom to move the market back up. We will know more by the close on Friday.